Mumbai, Jan. 4: State Bank of India (SBI) will consider raising capital through a fresh stock flotation if the high rate of growth in its lending continues.

Chairman A. K. Purwar said the money raised that way could be used to bolster tier-I or tier-II capital. At the same time, some of its existing cash pile could be used for a long-planned foreign acquisition, possibly in Asia or Africa.

'As far as overseas presence is concerned, we are serious. I expect to be able to announce something soon,' Purwar said on the sidelines of a function organised by SBI Life to launch its unit-linked insurance plan.

In Calcutta, his colleague, managing director Chandan Bhattacharya told an interactive session organised by an exporters' body the buyout has been finalised, but the announcement will have to wait for some time.

Talking of credit growth, Purwar said the increase so far has been over 25 per cent with signs that year-end tally will be at least 19 per cent. 'A 25 per cent growth rate is not sustainable. It will moderate in future, also because the figure will be computed on a large base,' he added.

Purwar, who said SBI was valued at $7.8 billion, also signalled his readiness for domestic acquisitions, though he rushed to clarify that it was only an 'intent' at this stage.

Signals about a fresh stock offer from SBI came on the same day as reports about the decision by Bank of Baroda (BoB) to come out with another issue. This will help it meet a stiffer set of capital norms, called Basel II, from 2006. Its board cleared the flotation at a special session today.

Insurance overdrive

SBI Life Insurance Co, which India's largest commercial bank set up with Cardiff, is looking at an investment of Rs 500 crore from promoters to fund growth at a pace that will make it the largest insurer after LIC.

At present, some of its policies are sold through State Bank's 5,000 branches; by March 2006, 10,000 should be doing so.

Purwar hinted at a non-life insurance foray in future. SBI Life chief S. Krishnamurthy said he expects Rs 500 crore to be added to the company's capital in two years.

The exact amount will depend on regulatory requirements. SBI may chip in with 74 per cent of the sum, while Cardiff will bring in the remaining 26 per cent to the company, which has a paid-up capital of Rs 175 crore.